Considering Anti-Money Laundering Software for Your Institution

July 27, 2022

By: Edward Pugh, CAMS, Consultant

For many financial institutions, one of the most impactful purposes of the Anti-Money Laundering Act of 2020 is the encouragement of technological innovation and the adoption of new technology by financial institutions to more effectively counter money laundering and the financing of terrorism. While a requirement to adopt technology in the AML space is not spelled out, the encouragement is being meted out in regulatory exams. Industry professionals have noted that the asset-size thresholds for scrutiny of the adoption of technology (or lack thereof) is decreasing.

Aside from regulatory expectations, there are many advantages in adopting AML technology solutions, which include better detection capability, more efficient workflows, better information flow, and many others. There is a plethora of providers in the marketplace offering a wide range of products and capabilities. However, the aim of this article is to lay out some considerations once the decision to adopt new technologies has been made. Here are some things to consider:

  • Risk Assessment. Your institution’s BSA/AML risk assessment should drive the technology selection process. It is important to be able to demonstrate that the technology does in fact mitigate the risks that were assessed. The risk assessment can also serve as a guide in determining the sophistication of the software needed; a lot of products in the market may offer many features and options that may not be necessary.
  • Data. Data quality is the most important aspect of implementing AML software technology. Any implementation will require time to be devoted to data cleansing and mapping. Most vendors offer varying levels of assistance depending on your needs. Whether this part of the process is handled in-house or through a vendor, there will be costs associated with data preparation.
  • Future-proof. While no technology can be “future-proof,” it is important to have a platform that is robust and can handle upgrades or changes in your institution’s core software and any ancillary systems that may be feeding data into the AML software. There should also be a clear process for updates as regulations, laws, and criminal typologies change or are discovered.
  • Maintenance. BSA/AML evolves constantly. Financial institutions and their customers continually change. Over time, fine-tuning scenarios and thresholds is an important periodic activity. Some software allows the institution to conduct changes to the model while others require more vendor involvement. It’s an important area to consider when choosing between the numerous options.
  • Efficiency. Properly implemented, quality AML platforms will reduce the compliance burden in your institution. However, it is important to note that there will be “growing pains” in the beginning. One of the most common surprises is the often-dramatic increase in alerts generated. This is usually due to new scenarios being monitored, and much more transaction data being monitored. It can also be due to data quality issues that can arise during implementation. This surge in alerts is temporary. The efficiency comes as the system is fine-tuned and staff becomes more acquainted with the platform and its capabilities.

One final thought: Think big, start small. AML platforms can be customized and upgraded. For many institutions, the choices are overwhelming. Of course, there are many other factors that must be taken into account, especially cost. Having a clear understanding of the above-mentioned considerations will help weigh the cost considerations in choosing between the many options available in the marketplace.

For more information on the selection of AML software, contact us at
[email protected] or 330.422.3482. And if your institution has AML software in place, please read the following article, AML Validation & Review, to learn more about how we can assist your financial institution in the validation and review of your existing AML software. Our BSA team is uniquely qualified to guide you through this often complicated and technical process, and we look forward to working with you to achieve your goals.

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